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BHBM Tax Law Alert | Income Tax Relief Provisions for COVID-19


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LOUISIANA TAX LAW UPDATE

Income Tax Relief Provisions for COVID-19 Public Health Emergency

On March 30, 2020, the Louisiana Department of Revenue (the “Department”), issued guidance in the form of Revenue Ruling 20-002 (the “Ruling”). The Ruling was issued in connection with the threat posed to Louisiana citizens by the COVID-19 pandemic. The purpose of the Ruling is to provide guidance with respect to certain relief provisions concerning income tax. Specifically, the Ruling provides that for the 2020 tax year, the first declaration payment remains due on or before April 15, 2020, and the second declaration payment remains due on or before June 15, 2020. However, the Ruling does provide certain payment relief for taxpayers, as described below:

Background

Generally, individuals are required to file and pay declarations of estimated income tax with the Department. Declarations are required if a Louisiana taxpayer’s individual income tax liability can reasonably be expected to exceed $1,000 after deducting all allowable credits (the amount is $2,000 for taxpayers with married filing jointly status). The purpose of requiring declaration filings and payments is to provide for the timely payment of income taxes throughout the tax year as the individuals earn income. Historically, many taxpayers are exempt from this requirement because their income tax is withheld by employers as withholding tax and remitted directly to the Department. Thereafter, individuals can then claim a credit for taxes withheld by employers when preparing and filing their individual income tax returns.

For the 2020 tax year, the first declaration payment is due on or before April 15, 2020, and the second declaration payment is due on or before June 15, 2020. If an individual is required to pay declarations of estimated tax, but fails to do so, the Underpayment of Estimated Tax (“UET”) penalty is added to the tax due. However, LA R.S. 47:118(D) provides several exceptions; whereby if any exception is satisfied, the penalty is not assessed by the Department. The most commonly applied exceptions include:

a)  The taxpayer does not owe more than $1,000 after consideration of credits and tax withholdings.

b)   The taxpayer’s current year payments equal or exceed the previous year’s tax liability for each installment period.

c)  The taxpayer’s current year payments equal or exceed 90% of the tax computed on annualized income for the period ending based on calendar quarters.

Ruling

In consideration of the threat imposed by the COVID-19 pandemic, the Department rules as follows:

The Department shall automatically waive any UET penalty otherwise due for the April 15 and June 15, 2020 declaration payments provided the following criteria are met:

a)  The taxpayer pays the April 15 and June 15, 2020, declaration payments timely.

b)  The amount paid on the April 15, 2020, declaration payment is at least 90% of the amount paid on the April 15, 2019, declaration payment.

c)  The amount paid on the June 15, 2020, declaration payment is at least 90% of the amount paid on the June 17, 2019, declaration payment.

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